June 2, 2003 5:58 PM PDT

Latest AOL 9.0 beta released

America Online began testing new features for an upcoming version of its proprietary service, including support for its own multimedia formats in its video and audio playback software, sources close to the company said.

The features were made available on Monday in the second beta release of a software upgrade tentatively called AOL 9.0 and code-named Blue Hawaii. They include a media player that adds support for a new streaming media format developed in-house by AOL's Nullsoft division. Other highlights include a new e-mail interface with a spam folder built in, and a Web page accelerator dubbed "Velocity."

AOL is expected to test features throughout the summer as it prepares the official release of the software, although details of those coming enhancements were not immediately available. Previously, AOL introduced a new "skin" feature that lets members alter the look and feel of the service and gives support for Apple Computer's QuickTime multimedia formats.

An AOL representative declined to comment on the latest beta test.

AOL 9.0 is a critical software upgrade for America Online, which has seen its grip on the dial-up Internet access business weaken in the face of broadband and discount rivals. AOL in April said its U.S. subscribers declined by 289,000 from the previous quarter, the second consecutive quarter of declines. Meanwhile, after years of denying the online advertising decline, AOL this year said it expects its online advertising revenue to plummet between 35 percent to 40 percent.

AOL's revitalization plan has focused on making the service more appealing to its users, some of whom have criticized AOL for falling behind the curve on key features such as spam filtering. The new beta also focuses on enhancing AOL's media-playback software, a strategic technology for the company as it seeks to appeal to broadband users by making high-quality multimedia content one of its core offerings.

"They realize that dial-up is declining and they need to come up with a broadband strategy," said Charlene Li, an analyst at Forrester Research.

At the forefront of AOL's software overhaul is a streaming media player that will now come pre-installed with AOL's own streaming technology and Apple's QuickTime player, sources said. QuickTime will be packaged alongside other media players in the current AOL 8.0, including RealNetworks and Windows Media. Bundling in QuickTime will offer Apple a greater reach for its technology.

Code-named Llama, AOL's media player is based on code from its Nullsoft subsidiary, which produces the Web-based Winamp media player, the sources said. The AOL version will use Winamp's 2.x software, an earlier version of its current 3.x product.

Also new on Llama will be support for Nullsoft's streaming audio and video formats, called NSA and NSV, respectively. AOL plans to use Nullsoft formats to stream exclusive content produced for AOL 9.0, but it will not force third-party providers with their own Web sites to support the format. Nullsoft formats are currently being used in AOL's narrowband and broadband radio services.

AOL's test of multimedia software comes less than a week after parent AOL Time Warner settled a private antitrust suit with Microsoft for $750 million along with conditions that include acquiring optional licenses to use Microsoft's digital media technology in future products.

That deal set the stage for a broad collaboration with Microsoft on key software for distributing and accessing video and audio over the Net. But the new AOL beta suggests that the company has no immediate plans to drop alternative technologies.

Changes are also afoot for AOL's e-mail service, which has been criticized for being too rudimentary for most Internet users. The new test version is not a great departure from its current form, but it includes options for more advanced navigation.

Page loading and spam
One of the most significant changes is the addition of a spam filter. Many AOL users have criticized the company for failing to filter out most of the unsolicited bulk e-mail clogging their in-boxes. In this latest test, AOL is borrowing a page from Yahoo by setting up a junk mail folder that receives suspected spam messages. People can view messages in the junk folder to determine what is spam and what may be legitimate.

Other tweaks include new tabs for the in-box, such as one to view all messages and another to search for messages. AOL 9.0 will also let people download AOL Communicator, a software package that includes an e-mail client that resembles Microsoft's Outlook in its appearance and functionality.

Finally, AOL has also begun testing a caching technology, called Velocity, that is designed to speed up Web page download times, the sources said. The technology is not new to dial-up ISPs, since rivals EarthLink and NetZero are offering similar Web accelerators for a greater subscription fee.

The technology behind Velocity is a client-side caching system created by Inktomi, which was recently acquired by Web portal Yahoo. Sources close to AOL said the online giant acquired this business from Inkotmi shortly before it entered into acquisition discussions with Yahoo in 2002.

Yahoo sealed its $235 million acquisition of Inktomi in March, largely in an effort to lessen its reliance on rival Google to power its algorithmic search results.

The sources close to AOL did not offer deal terms, but said the acquisition included a number of former Inktomi engineers now working at AOL.

The beta test comes as AOL and parent AOL Time Warner face a sea change. Heralded as a powerful mix of old and new media at the time of the 2001 merger, the combined company has since sagged under a $26 billion debt load, declining advertising revenue, regulatory investigations into alleged accounting irregularities and executive infighting.

AOL, once described as the jewel in the combined company's crown, is now the subject of spinoff rumors, although the company has publicly said it has no plans to sell the division anytime soon.

Central to AOL's turnaround will be the threat posed by broadband, and the task of retaining a hold on its 34 million narrowband subscribers. As more users are expected to upgrade to a third-party broadband provider, AOL is trying to catch them along the way by focusing its development efforts on a high-speed world.

The company in March unveiled AOL for Broadband in an effort to give defectors an option to maintain their AOL account while accessing the Net from someone else's pipes.

AOL has not set a date for AOL 9.0's final release. Sources close to the company said more features will be unveiled to beta testers this month.

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